3 Two tests for determining applicability of Exemption: 1. Duties; and 2. Salary Basis (not in the case of Teacher and Academic Administration exemptions, which are driven by duties only so no salary basis)

4 The Duties Test

5 Executive Exemption Primary duty must be managing the enterprise or department. Regularly directing the work of at least two other full-time employees. Authority or strong input on hire/fire, promotions, demotions, etc.

6 Administrative Exemption Office or non-manual work directly related to management or general business operations of the employer. Primary duty includes exercise of discretion and independent judgment with respect to matters of significance.

7 Professional Exemption Learned Professional: Primary duty includes work that requires knowledge of an advanced type in a field of science and learning customarily acquired by a prolonged course of specialized intellectual instruction. Creative Professional: Primary duty includes work that involves invention, imagination, originality or talent in a recognized field of artistic or creative endeavor ( Creative Professional ).

8 Teachers Primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. The salary and salary basis requirements do not apply to teachers.

9 Education Administration Employees Compensated on a salary basis that is at least equal to the entrance salary for teachers in the school. Primary duty performing administrative functions directly related to academic instruction or training in a school. Examples: superintendent and any assistants responsible for administrative matters such as curriculum, methods of instruction, measure and testing of students; principals, vice-principals, department heads, academic counselors.

10 The Salary Basis Test

11 Employee must be paid on a salary basis Current Salary Level: $455/week ($23,660 annual) Final Rule: $913/week ($47,467 annual)

12 The Final Rule Goes into effect on December 1, Does not impact the Duties Test. More than doubles the standard salary level required for an employee to satisfy the White Collar exemptions. Salary level increases from $455/week ($23,660 annual) to $913/week ($47,467 annual): tied to 40 th percentile of earnings of full-time salaried workers in lowest income Census region.

13 The Final Rule Permits employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the standard salary level. Increases total annual compensation for Highly Compensated Employees from $100,000 to $134,004: tied to 90 th percentile of full-time salaried workers nationally. Includes mechanism for automatically adjusting every 3 years to maintain levels at above percentiles.

14 Compliance Primary Inquiry - does the employee regularly work more than 40 hours in a week? If so, consider: o Increasing salary to new salary level o o Maintaining current salary but paying overtime when due (must track hours) Adjusting schedules to reduce overtime and requiring advanced authorization for overtime

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